South Beverly Wilshire Jewelry & Loan v. Superior Court

In this case (1) a person voluntarily relinquished possession of his property under a consignment, (2) such property was then wrongfully transferred by the consignee to the possession of a third party who took it for value and without notice, and (3) the consignor could have perfected a security interest in the property but did not. Under those circumstances, the applicable rule is set out in Civil Code section 3543, which states that “[wjhere one of two innocent persons must suffer by the act of a third, he, by whose negligence it happened, must be the sufferer.”

This case has its origins in written consignments of diamonds, other gems, and jewelry (the goods), by the plaintiff, Emanuel Gordon, doing business as Manny Gordon Trading (plaintiff), to one of the defendants, Richard Maslan & Co., for the purpose of said defendant’s inspection and prospective sale of such goods. Also named as a defendant in this case is the individual Richard Maslan (Maslan), whom the complaint alleges is the sole shareholder, director and officer of Richard Maslan & Co. (Maslan Company).

The written consignments specifically state that a sale of the goods by Maslan Company could only be…